Embrace the dip because higher gold prices are coming - Andrew Hecht
(Kitco News) - The gold market has been unable to break its chains as the price hovers around $1,900 an ounce, but one commodity analysts said that the price action isn't a bad thing as it is allowing investors to accumulate a strategic precious metals position in their portfolios.
In a telephone interview with Kitco News, Andy Hecht, partner at Bubbatrading.com, said that investors should embrace lower prices in the current environment.
"I embrace any dip in gold," he said. "I want to see lower prices because that means I can just buy more," he said. "We are just starting what I expect is the next commodity supercycle, and that will mean highergold and silverprices."
Hecht said that he expects that gold prices will push through $2,000 an ounce next year. He added that silver is headed in the same direction, and he sees new all-time highs within the next two years.
"The purchasing power of all fiat currencies is falling, and that will make commodity prices go higher. In this environment, you have to have some gold and silver," he said. "Every currency is in a bear market compared to gold."
As to what will be the spark that drives gold higher, Hecht said that continued stimulus spending will drive gold prices higher. He added that no matter who wins the Nov. 3 U.S. general election, the government will be forced to pump more money into the economy before the end of the year.
As to which candidate will be the best for gold, Hecht that that Democratic nominee Joe Biden has a slightly better advantage because he is perceived as the candidate who will unleash the most stimulus.
"Regardless of the election, trillions of more dollars will be printed by February and that is going to drive gold prices higher," he said. "You want to have a position now so you can take advantage of the rally."
As to how investors should structure their gold position, Hecht said that investors should have a core holding of 10%. At the same time, investors can hold another 10%, that is a tactical position where they trade in and out.
"I think holding 20% of your portfolio in gold makes sense in this environment. But know that 10% is a flexible position. I like to think of it as aggressive investing," he said. "You can maximize your investment by taking profits on the way up. When the market looks terrible, that is when you want to buy and when everything looks perfect and nothing can go wrong that is when you start to take some profits."
Hecht added that with gold prices expected to go higher, investors should also look at holding some mining equities. The easiest exposure is through mining exchange-traded funds, he said. Hecht added that he always recommends the VanEck Vectors Gold Miners ETF (NYSE: GDX), or the VanEck Vectors Junior Gold Mine (NYSE: GDXJ)
"I really like the diversification these two ETFs offer," he said. "If gold prices are going higher, then this is the time to own the miners and take advantage of the market's built-in leverage.
As for gold as an international currency, Hecht said that he sees the most value in buying gold in U.S. dollar terms.
"I wouldn't buy gold in Canadian dollar or (Australian) dollar. In a secular bull market, these commodity currencies, I think, will do well. The best value for gold is in the U.S. dollar," he said.